1 October 2009

The price is right...or is it?

Suppose that you are browsing the aisles of your local store and discover, to your delight, that the price on imported tobacco has been slashed by 50%. Imagine then your disappointment if you were informed that the displayed price is incorrect and that, to support your habit, you are required to pay the full price as listed on the store's database.

The legal position until the general effective date of the Act is that the consumer would not be able to hold the supplier to the price indicated on the tobacco packaging or the shelf on which the tobacco was being advertised for sale. A price tag is merely an invitation by a supplier to do business with a consumer and does not constitute an offer to contract. A supplier is accordingly free to accept or reject any offer in the event that the price stipulated on a good does not align with the supplier's actual price.

This established principle dates back to the early 1900s and exists for very practical reasons. Smith J in the case of Crawley v Rex 1909 TS summarised the issue as follows:

"The mere fact that a tradesman advertises the price at which he sells goods does not appear to me to be an offer to any member of the public to enter into the shop and purchase goods, nor do I think that a contract is constituted when any member of the public comes in and tenders the price mentioned in the advertisement. It would lead to extraordinary results if that were the correct view of the case. Because then, supposing a shopkeeper were sold out of a particular class of goods, thousands of members of the public might crowd into the shop and demand to be served, and each one would have a right of action against the proprietor for not performing his contract".

The Act provides that a retailer must not display any goods for sale without displaying a price in relation to those goods, unless the goods are being displayed predominantly as a form of advertisement of the supplier, or of the supplier's goods, in an area within the supplier's premises to which the public does not ordinarily have access (such as a shop window).

Accordingly, the Act generally obliges a supplier to display a price for goods on sale. The Act further sets out a number of detailed criteria for establishing whether a price is being "adequately displayed". Naturally, a supplier must not display conflicting prices for goods.

The underlying principle in relation to prices is that a supplier must not require a consumer to pay a price for any good higher than the price displayed for the good concerned or, if more than one price is concurrently displayed, higher than the lowest of the prices so displayed.

There are two exceptions to this principle, and where a supplier is not bound by a displayed price, namely -

  • where the displayed price contains an inadvertent, and obvious, error and the supplier has corrected the error and taken reasonable steps to inform consumers of the error and the correct price; and
  • where an unauthorised person has altered, defaced, covered, removed or obscured the price displayed or authorised by the supplier.

It is debatable whether the relevant provisions of section 23 of the Act could be interpreted to override the common law position that a price tag is merely an invitation to do business. It is interesting that the exceptions are referred to as circumstances where the supplier "is not bound" by a price.

This construction seems to suggest that the consumer would be entitled to hold the supplier to a displayed price, unless the supplier could rely on one of the exceptions. This is a radical departure from the common law relating to displayed prices as it currently stands.

Seraj Haroun,
Associate, Corporate and Commercial

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